Little by little, mortgage rates rise

Refi activity is slowing, spurring new buyers to lock in rates

SEATTLE POST-INTELLIGENCER STAFF AND NEWS SERVICES

Updated 10:00 pm, Wednesday, July 9, 2003

The historic wave of home refinancings, which has fueled U.S. consumer spending, looks as if it may have crested. Refinancings are declining because mortgage rates are rising again -- both locally and nationally -- after having fallen to their lowest levels in more than 40 years.

In Washington state, the average 30-year fixed mortgage rate yesterday was 5.449 percent among 16 surveyed banks and credit unions, according to Informa Research Inc. of Calabasas, Calif. That's up from 5.39 percent on Saturday and 5.30 percent on May 31.

Yesterday, Washington Mutual was charging 5.125 percent for a 30-year fixed with 1 point and no rate lock.

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Nationally, rates began to rise slightly in early June as bits of promising economic news caused financial markets to boost yields on 10-year Treasury notes, the benchmark for mortgage rates.

For the week ended Friday, the average 30-year fixed mortgage increased to 5.37 percent, from 5.23 percent one week earlier, according to figures released yesterday by the Mortgage Bankers Association of America.

That group said the average 15-year fixed mortgage increased to 4.73 percent, from 4.63 percent one week earlier. The average one-year adjustable-rate mortgage increased to 3.15 percent, from 3.11 percent the week before.

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As a result of these increases, the rush of homeowners seeking to refinance their mortgages has slowed, while some buyers are now rushing to lock in rates in case rates go even higher.

The bankers association said its refinancing index, which tracks the number of new applications, fell 21.3 percent to 6769.3 last week. While the drop was steep, refinancing remains at record-high levels -- even in comparison with last year's strong run.

"I couldn't call today's refi number worrisome for consumer spending because we are still at a very elevated level, not only historically speaking, but also compared with last year's record-breaking year," said John Lonski, chief economist at Moody's Investors Service.

The bankers' index hit a record high of 9977.8 at the end of May, he noted, and the benefits of that performance may well carry over to 2004.

Doug Winter, a manager for Wells Fargo Home Mortgage, said yesterday that as procrastinators and rate-watchers saw rates going up, many decided it was time to lock in. The company processed a record number of applications in June.

Consumers have gotten used to watching rates drop to their lowest level in a lifetime, so many have forgotten that during the days of double-digit rates, even a 6 percent rate would have made a home buyer salivate, Gumbinger said.

So what should consumers do?

"No one can accurately predict when rates will rise or fall," Winter said. "Our recommendation is that if today's rates meet your financial needs, take action. Too many people try to play the rates and fail to take action."